Converting texture files in blender using Python
Okay, I figured it out.

image = bpy.data.images.load("filepath_to_source")  
image.file_format = "TARGA"  
image.save_render(&lt;filepath_to_destination&gt;)


I tried using image.save() function before I posted this question, which raised a Runtime Error: 


  Image does not have any image data


and I thought I was doing something wrong. Using save_render() function seem to have fixed it. I still don't know why save() didn't/doesn't work.